Updated: Oct 25, 2022
Kroger Acquires Alberton's...What Does It Mean for Restaurants?
All these headlines and more represent our thoughts and views on the world of restaurants, technology and off premise food in our round up of the last week’s hot news stories - subscribe today to the Monday Minute and register at www.learn.delivery for more bonus content.
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Carl: What does Kroger's acquisition of Albertsons mean for restaurants? Dual branding with FAT brands and positive customer sentiment through a Pop Menu survey. That's all ahead on this week's Monday Minute.
Carl: Monday Minute works like this. We're going to ask each other five questions about news headlines that have caught our attention about the worlds of restaurants, off premise and technology that in some way line back to our book Delivering the Digital Restaurant. Are you ready? Let's go.
Okay, Meredith, first question for you this week. There was a bit of a news in the grocery sector that I thought we should speak about. A certain company called Kroger's, acquiring another small company called Albertsons. Big deal, small deal? Tell us about it and what does it mean for restaurants?
Meredith: Well, first of all, I would say the deal has not gone through yet.
It has to be approved by the federal government. So let's give it a minute, but I, I think it will go through and I think it should go through. Although Albertsons and Kroger are the two largest, focused grocers, when you put them in context of all the different ways in which consumers can get grocery, they're really pretty small.
In particular up against the likes of Walmart and Amazon increasingly. I think you have a picture. You want to put it up so people can see it, Carl?
In the dark green there, you can see them highlighted -Albertsons and Kroger respectively. And although we think of them as very, very large, when you include Walmart, Costco, Amazon, a bunch of other folks in here. They really don't have that dominant of market share, and I think that speaks to why they're potentially combining. As the world shifts to more digital and all kinds of companies, including grocery stores, need to make larger and larger investments in technology, it is helpful to have a larger store base over which to leverage those costs. the two of them coming together makes all the sense in the world. Of course, Kroger has been doing a lot of innovation on the tech front with things like smart carts and of course their deal with Kitchen United trying to reverse the long term shift of American consumer spend first from grocery to restaurants, which of course restaurants came out this year, estimated 55% of food spend. But then second from in store to a much more digital environment. So, To me, having the two of them together makes all the sense in the world for the two of them.
Now, what does it mean for restaurants? Well, first of all, it certainly means that there will be a stronger competitor who is putting more time, effort, and attention toward things like prepared foods and technology which Kroger has been big on both in an effort to compete more effectively with restaurants.
So hopefully that means, at least for them, they'll be a larger force to be reckoned with. And then the second thing it potentially means, It creates a very large buyer of food second only to Walmart in America. So in terms of impacts on the supply chain, could be significant. Now, I happen to subscribe to these big players- I don't think they, you know, lock out smaller players. I think that they actually improve the supply chain as a whole. So I see that as a good thing. But lots of things happening here. Seems like grocery is farfield from restaurants, but everything that happens there affects how we eat our food.
Okay, Carl? So PopMenu came out with a new consumer survey and we always love consumer surveys because it tells us what's going on with them. So what's going on with them?
Carl: We always like to sprinkle a little, little bit of data, don't we? Usually, I let you have the data questions, but it's my turn this week.
You're right. Pop menu surveyed a thousand customers and about 415 restaurant owner operators just last month, and they were asking them questions largely about their habits of purchasing food over the course of this year, especially in the context of the inflationary environment. And you know what, Meredith, The results actually were pretty positive.
First of all, 30% of consumers spend about $180 per week on restaurant food, which I think it's quite staggering, right? When you think about the amount of occasions that we're talking about for that. 58% of them, 58, 5 8 say they spend more and are spending more time in eating restaurant food this year in comparison to last year.
And for the off-premise friends amongst us, 69% of them said that they're ordering more delivery and takeout than last year. So of course it is a sample of a thousand customers, but I think that's a pretty positive sign. And I think they don't dismiss the fact that inflation is happening. It's obviously costing more.
But really it's the convenience factor. 61% of those responding said it's the convenience factor that's driving that type of behavior. The other items I thought was interesting, 43% saying local restaurants and supporting them.. 36% of them are feeling the pain of grocery. And the fact that, well, look, grocery is expensive as well, so why don't I just have food brought to me.
And then the last one, which we always talk about is time. You know, 28% say they, they don't have time to cook. So I, I think that's an encouraging sign for where we are right now. We are seeing an increase based on the survey of more people eating fast food, which I think is a behavior that we would liken to any recessionary type environment where people tend to buy down, if you will, in categories of food.
But increasingly we're finding consumers are okay with this environment. 68% of them. Said they are okay with restaurants raising their prices. And , guess what, Meredith, over half of them, 51% said that they're okay with smaller portion sizes. So maybe this inflation thing isn't so bad for our belly sizes and things like that.
'm on a diet. Meredith, this is good news.
All right. Third question. Dual branding strategies. FAT brands have been talking this week about having dual branding strategies for their brick and mortar locations.
We've also had McDonald's in the news with a certain donut chain. You've had a bit of experience in this. What 's your take? Do you think it's a winning
Meredith: FAT Brands certainly is not the first to do dual brand in a physical brick and mortar setting. And as you mentioned, I have a little experience with this having spent several years taking apart Taco Bells that were combined with KFCs, Taco Bells that were combined with Long John Silvers. I can tell you that while the top line numbers sound attractive, it doesn't always work. And frankly, I would apply the exact same lesson to virtual brands and to this Krispy Kreme McDonald's situation.
And that is an operational one. So while it sounds great to be adding the upside of, 20% of sales and that seems like that will make the hurdle that much easier to get over in any given restaurant, and as FAT Brands said, landlords like it because they have more confidence in the revenue that will come out.
All these things sound really good. But if you're adding complexity into the restaurant it is not going to work out very well. And that complexity typically comes when there are either extremely over taxed stations or very, very different processes. And for this reason, I think this is where we see virtual brands that are designed to fit in with the existing restaurant processes work much, much better than those are very different. Now, FAT Brands has a portfolio of many different brands. So hopefully the wise folks over there at FAT Brands are thinking about that as they pull different brands from the portfolio to put them together. If not, it's my tip for you guys to definitely be mindful of the operations ease as you're going after that revenue upside.
And same thing for all of you considering virtual brands.
This is almost in a way a related question, Carl, which is that Smokey Bones is taking their multiple brands and they are putting in them into one single digital ordering platform.
Tell us about that.
Carl: You're right. This is uh, well positioned in our order today. Smokey Bones, for those of you that don't know, are about a 60 unit chain uh, great CEO James O'Reilly.
We've featured him in the past on the Monday Minute when we're talking about people and culture and the way in which they are trying to address that major challenge across our industry. But this particular article was referenced in their virtual brand strategy. Now, they were actually ahead of the game in comparison to many restaurant groups.
They started with virtual brands back in 2019, and now they have them across their entire chain, but they've added two more this year to address gaps that they've identified in the comfort food market through their, their consumer research. One called Bowl Market, and the other one called Tender Box, but this then created a challenge. I think it's a challenge that I've often had to answer myself, Meredith, to folks that I, I support, and I'm sure you've had the question posed your way as well on occasion. And that is, should we have four, five different digital ordering native solutions or should we just have everything under one umbrella.
They've thought, you know what, this is gonna add way too much complexity. And so why don't we just create one platform where a customer can avoid what James calls the veto votes, which is where when you're ordering for a group, you don't get to just choose one brand.
We face this, of course, in the ghost kitchen world and the benefits of having an interface with Kitchen United where people can choose from numerous different brands. I think what James and Smokey Bones are trying to do here is give their customers that same type of solution. They've partnered up with a company called To Go Technology.
It's taken them about a year to develop, but now customers are able to go onto their interface and to be able to choose along the top any of the brands, and then order that in one basket, which of course then drives efficiencies, but also widens the customer's level of choice. Now, I don't know whether that is the right strategy.
I think it's a really interesting one because you could argue that some customers might really navigate and just love the bowl market concept, but have never heard of Burger experience. Maybe they don't, don't like burgers. And I think that's the question as to is it the right place to create an interface for
guests in just on the digital ordering side, Or is it better to think about how to create a better way of reaching out to those guests once you've got their data and to understand how do you want to connect to them through your own CRM and outreach campaigns? So I'm gonna watch this one with particular fine eyes, because I think it sounds very intriguing and it might give us some direction as to how other more forward thinking restaurant groups like Smokey Bones, handle this in the future.
Okay. Last question. It's around subscriptions. Meredith. Go Puff are increasing their subscription charges for delivery. Tell us about this. Are you seeing a trend here and do you think it's going to continue?
Meredith: GoPuff is increasing their subscription charge from $5. 99 to $7. 95 a month to get their unlimited deliveries. And, not surprising because, many of these companies are not profitable. So there's one way to increase profits and that's to increase prices. And then the other thing that's not surprising of course is costs are up everywhere with inflation.
So why wouldn't this be one of the costs that's up? I think yes, it is going to be a trend and we're going to see more of this as companies leave their customer acquisition phase, fighting it out for market share and enter into a more healthy growth profitability phase. I think we saw the exact same thing with Amazon many, many years ago.
You remember when prime first came out, it was much, much cheaper than it is today, and when they raised the. Did you drop it? You did not. Did you say anything? You did not. Were you annoyed? Maybe. But you had gotten so used to it that you were willing to pay for it because you had come to value it. And I think that's the be that Go Puff is taking here is that the people who pay for it value it, and so they'll be willing to pay more for it.
Now it will be interesting to see if that is true when and if, let's say if - knock wood -start to have a softening in their budgets if their economic outlook is not so good, if their unemployment rates go up nationally, or if we see wage inflation stop and start to stall out.
Then maybe higher prices on what some might consider a luxury are not the smartest thing. But I think for now they've got a lot of runway and I would expect to see a lot of other people doing something similar.
Carl: That's it for this week's Monday Minute. Thank you as always for listening. If you have any questions, any comments that you have about today's articles or anything that you'd perhaps like us to feature on a future Monday minute, feel free to reach out. Either comment below or contact either Meredith or I on LinkedIn or through our website at www.Learn.Delivery
Thank you as always for listening, and we'll speak to you next time.
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